IDBI Bank has started insolvency resolution process against Lanco Infratech Ltd on Monday following a directive from the Reserve Bank of India (RBI). While this is the first resolution process initiated by the lenders against 12 large borrowers identified by the RBI last week, other cases are expected to be taken up by State Bank of India and other banks later this week.

Meanwhile, shares of Lanco Infratech, Amtek Auto, Bhushan Steel, Monnet Ispat and Alok Industries tumbled up to 20 per cent on Monday amid reports that these companies figure among the list of troubled accounts named for bankruptcy action. However, the central bank has not yet revealed the names of the 12 large defaulters. Lanco Infratech shares crashed by 20 per cent to Rs 1.88 on the BSE on Monday. Amtek Auto’s scrip dived 19.97 per cent to close at Rs 23.45 and Bhushan Steel tanked 16.16 per cent to Rs 58.90 on the BSE. Shares of Monnet Ispat crashed 12.37 per cent to Rs 30.10 and Alok Industries plummeted 11.61 per cent to Rs 2.36

According to the company and bank officials, RBI directed IDBI Bank, the lead bank of Lanco Infratech to initiate corporate insolvency resolution process (CIRP) for Lanco under the Insolvency and Bankruptcy Code, 2016. “The CIRP is mandated at Lanco Infratech level only with fund based outstanding exposure of Rs 7,799 crore and non-fund based outstanding exposure of Rs 3,349 crore as on March 31, 2016,” Lanco Infratech said. A meeting of lenders of Lanco Infratech was scheduled by IDBI on Monday to discuss on the mandate received on CIRP as directed by the RBI.

SBI will initiate insolvency resolution process against six of borrowers, PNB, ICICI Bank, Union Bank and Corporation Bank are expected to take the up the remaining cases. The Internal Advisory Committee (IAC) of the RBI recommended for IBC reference all accounts with fund and non-fund based outstanding amounts in excess of Rs 5,000 crore, with 60 per cent or more (Rs 3000 crore or more) classified as non-performing by banks as on March 31, 2016. However, the central bank has not yet revealed the names of the 12 large defaulters.

Banks are meeting to discuss six of the 12 accounts named by the RBI before referring accounts to the National Company Law Tribunal (NCLT) by the end of this month, said a banking source. As these are large accounts and involve many banks, they will try to take a common view on all administrative requirements before referring these accounts to the NCLT. Banks will also decide on appointment of insolvency professional (IP) who will later decide on the resolution plan and submit it to the lenders for their consideration.

Steel companies account for 50 per cent of 12 large corporate defaulters identified by the Internal Advisory Committee of the RBI for insolvency proceedings. Once the case is referred to the NCLT under the Insolvency and Bankruptcy Code, an interim insolvency professional is appointed and will take control of the assets and form a creditors committee.